Canada’s Deficit-Cutting Plans Face Nuclear Hit

Canadian Finance Minister Jim Flaherty’s deficit-reduction plans may be in for a bit of meltdown after the government-owned nuclear agency hiked cost estimates for its waste clean-up efforts.

Reuters

Finance Minister Jim Flaherty picks up his new shoes at the Roots Leather Factory in Toronto ahead of tomorrow’s budget.

Just hours before Mr. Flaherty delivers Canada’s 2013 budget on Thursday, Atomic Energy of Canada warned that costs related to its decommissioning and waste-management efforts are 2.4 billion Canadian dollars ($2.34 billion) higher than it first thought. Last March, AECL recorded its liabilities at C$3.6 billion.

“The adjustment will be reflected in the government’s financial results for 2012-13,” AECL, which has a laboratory division that manages legacy nuclear waste, conducts nuclear R&D and produces medical isotopes, said in a statement posted on its website late Tuesday.

A spokeswoman for Canada’s Finance Department declined to comment on AECL’s statement and any impact it might have on the government’s books.

But, economists said Wednesday the additional C$2.4 billion in liability provisions would be reflected in the 2013 budget, and dashes any hopes of besting expectations of a C$26 billion deficit as anticipated in the government’s fall fiscal update. Department of Finance data indicate the budget deficit as of the first nine months of fiscal 2013 was C$12.99 billion.

“Looks like we will be closer to November’s estimate of C$26 billion deficit after all,” said Douglas Porter, chief economist at BMO Capital Markets.

The Canadian government still owns AECL even though the ruling Conservatives pledged back in 2009 to restructure the agency’s operations by either divesting assets or bringing on private-sector partners. In June 2011, the government sold the AECL division responsible for building nuclear reactors to SNC-Lavalin Group Inc. for C$15 million. However, as part of that SNC-Lavalin deal, the government agreed to retain liabilities. Last month, the government announced it would seek private-sector bids from firms interested in managing the AECL labs.

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